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Analysis: Despite market drop, stick to TSP asset allocation
Wednesday - 8/24/2011, 6:45pm EDT
Federal News Radio
Has the stock market roller coaster made you nervous about your Thrift Savings Plan? Have you switched money from the C, S or I funds into the super-safe G fund?
CBS MarketWatch columnist Alan Roth said if he were a federal employee, he would invest in all of the funds or in a life cycle fund.
"I would stick to an asset allocation, which meant that as stocks were going up I'd be having to sell or the life cycle fund would do it for me. And now that stocks are going down, I'd be buying," Roth said.
It goes against every intuition that we have," he said. "One sign you're doing something wrong in investment is it feels really good. When markets go down, it feels really good to get out of the C, S and I Fund. A sign you're doing something right is you're feeling a lot of pain."
People who "can't sleep at night when investments are going down" should probably stick in the bond market or the G Fund, Roth said.
Roth said he is a fan of index funds, or the life-cycle funds (L Funds.)
"It's a way of owning the entire market with the lowest cost," he said.
How the L Funds work: "Over time, it gradually gets more and more conservative as you get to needing the money," Roth said. "It does the balancing for you. It harnesses the power of inertia."
Read Roth's article on Moneywatch about the reasons stocks may be undervalued.
Also on Your Turn, Federal Times editor Steve Losey and senior reporter Sean Reilly, join the show in the second half hour to talk about the current and future status of buyouts. They will also discuss the drastic overhaul being proposed by the U.S. Postal Service, and the changes that the Super Congressional Committee may propose for federal workers and retirees.